European stocks drop as Trump leaves G7 and warns on Iran crisis

European stock markets are deep in the red as tensions in the Middle East escalate and US President Donald Trump abruptly leaves the G7 summit after urging the evacuation of Tehran. Trump also called a meeting of the US National Security Council, fueling investor concerns that the Israel-Iran standoff could spiral into a wider conflict despite earlier reassurances.

Fighting has intensified, with Israel claiming control of Tehran’s airspace and expanding airstrikes to Iran’s critical energy infrastructure. In response, Iran has launched its largest missile attack ever but has so far avoided moves that could disrupt global oil flows.

Meanwhile, the Bank of Japan kept its key interest rate unchanged at 0.50% with a unanimous vote. The board confirmed its tapering roadmap, planning to gradually cut monthly bond purchases from 4 trillion yen to 3 trillion by March 2026 and to 2 trillion by March 2027, in line with expectations.

On currency markets, the euro/dollar exchange rate remains stable around 1.156. Gold is flat at $3,388.4 per ounce, while oil prices edge higher, with Light Sweet Crude trading at $72.35 per barrel as geopolitical risks lift energy prices.

The Italian BTP-Bund spread widened slightly to 90 basis points, with the 10-year BTP yield at 3.42%.

Across Europe, Frankfurt sinks 1.49%, Paris sheds 1.14% and London slips 0.69%. Milan’s FTSE MIB drops 1.35%, while the broader FTSE Italia All-Share falls 1.33% to 41,811 points. Mid and small caps also retreat, down about 1%.

Among major stocks in Milan, Saipem, Stellantis, ENI and Brunello Cucinelli manage modest gains, bucking the trend. Banks weigh heavily on the index: Unicredit leads losses, down 2.57%, followed by Unipol, Leonardo and BPER, all dropping more than 2%.

In the mid-cap segment, Garofalo Health Care and Philogen post slight increases, while Multiply Group, TXT e-solutions, Danieli and Fincantieri record the heaviest declines.